Qantas to soldier on with capacity growth

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Despite blaming overcapacity in both the international and domestic market for its A$252 million pre-tax loss for H1 FY2014, Qantas is planning to increase group capacity by up to 3.5% in the second half.

Most of the increase will be in the domestic market, where it expects to add 3-4% capacity over the second half, relative to the same period last year, according to an investor presentation.

The airline adds that the second half is seasonally weaker than the first, while underlying domestic demand remains soft.

Nevertheless, chief executive Alan Joyce told reporters that the planned capacity additions are about “very clearly protecting our position in the domestic market”, particularly in light of rival Virgin Australia’s expansion.

“We haven't added as much capacity as our competitors have over the last few years,” he adds. “They're absolutely implying the position of adding capacity, even though they are losing a significant amount of money and their strategy is loss making.”

Although Qantas refused to issue profit guidance for the second half, it expects that both international and domestic yields will “remain depressed” during the second half of the financial year, implying that it is likely to again record an underlying loss before tax.

Qantas will announce its full-year result in August this year.